Steinhoff International's Australian arm, which owns Freedom and Fantastic Furniture, has been caught up in a global accounting scandal that has claimed the scalp of long-term chief executive Markus Jooste.

Mr Jooste, who had been Steinhoff's global chief executive since 2000, stepped down on Wednesday, when the company revealed it had hired PwC to look into "accounting irregularities".

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On Wednesday, prosecutors in Lower Saxony, the home of Steinhoff's European subsidiary, said there was a "suspicion that inflated revenue numbers had made their way into [Steinhoff's] accounts. This may have led to a inflated book value of the group."

According to a report in the Financial Times, investigators are looking into whether Steinhoff bolstered its numbers by selling intangible assets and partnership shares without disclosing that it had close connections to the buyers.

Web of undisclosed related party transactions

An in-depth report published this week by independent research group Viceroy alleged that Steinhoff International's acquired businesses had been struggling but profits had been propped up by a web of undisclosed related party transactions.

In Australia, Steinhoff Asia Pacific executives Michael Gordon and Tim Schaafsma were not immediately available for comment.

According to Steinhoff Asia Pacific's latest accounts, the company earned a net profit of $15.9 million in 2016 on sales of $663.3 million (net of GST) compared with a net profit of $5.5 million in 2015 on sales of $453.9 million.

On June 29, 2016 Steinhoff Asia Pacific Holdings Pty Ltd was acquired by Steinhoff Asia Pacific Group Holdings. The purchase price was not disclosed, but Steinhoff Asia Pacific Group Holdings, which was established days before the transaction with a paid up capital of $375 million, issued $165 million shares on June 24 to its parent company, Steinhoff UK Holdings.

Other directors of Steinhoff Asia Pacific include Johannes Van der Werde, who was Steinhoff's chief executive from 2001 to 2003, chief financial officer from 2003 to 2009 and is currently chief financial officer for Steinhoff subsidiary JD Financial Services, which has come under scrutiny from investigators.

In Australia, Steinhoff's accounts are audited by PwC, while its auditors in Europe are Deloitte.

Shares fall more than 60 per cent

Shares in Steinhoff, which is based in South Africa but listed in Frankfurt, fell more than 60 per cent on Wednesday to €1.10 ($1.72) after Steinhoff announced the investigation and delayed the release of its 2017 accounts.

The Australian Securities and Investments Commission declined to comment on whether it was investigating Steinhoff, but a spokesman said ASIC would consider any request from a foreign regulator regarding concerns about a parent company's accounting arrangements and the impact of this on local companies.

Steinhoff has been aggressively expanding in developed markets since moving its primary share listing from Johannesburg to Frankfurt in 2015 and is now the world's second biggest furniture retailer after IKEA.

Over the past two years it has snapped up British discounter Poundland, US-based Mattress Firm and Fantastic Holdings. It also owns Conforama in France.

Steinhoff was an underbidder for The Good Guys, which was sold to JB Hi-Fi for $870 million last year, and is also thought to have shown interest in Woolworths' loss-making Big W chain, and Fantastic's major rival, Super Amart, which is owned by Quadrant Private Equity.

The $360 million acquisition of Fantastic, which was completed last December, will boost Steinhoff Asia Pacific's sales by at least $540 million to more than $1 billion.

South African billionaire Christo Wiese, Steinhoff's largest shareholder and chairman, has taken over in an executive capacity on an interim basis until the investigation has been completed.

Mr Wiese said Steinhoff would "embark on a detailed review of all aspects of the company's business with a view to maximising shareholder value".